1166036--3/2/2009--MARKWEST_ENERGY_PARTNERS_L

related topics

{tax, income, asset}

{gas, price, oil}

{debt, indebtedness, cash}

{operation, natural, condition}

{acquisition, growth, future}

{cost, regulation, environmental}

{customer, product, revenue}

{financial, litigation, operation}

{operation, international, foreign}

{control, financial, internal}

{stock, price, operating}

{capital, credit, financial}

{cost, operation, labor}

{personnel, key, retain}

{loss, insurance, financial}

{product, market, service}

Risks Inherent in Our Business Our substantial debt and other financial obligations could impair our financial condition, results of operations and cash flows, and our ability to fulfill our debt obligations. The global financial crisis may have impacts on our business and financial condition that we currently cannot predict and our ability to access the credit and capital markets on attractive terms to obtain funding for our capital projects may be limited due to the deterioration of these markets. We may not have sufficient cash after the establishment of cash reserves and payment of our expenses to enable us to pay distributions at the current level. Our profitability and cash flows are affected by the volatility of NGL product and natural gas prices. Relative changes in NGL product and natural gas prices may adversely impact our results due to frac spread, natural gas and liquids exposure. Our commodity derivative activities may reduce our earnings, profitability and cash flows. We conduct risk management activities but we may not accurately predict future price fluctuations and therefore expose us to financial risks and reduce our opportunity to benefit from price increases. A significant decrease in natural gas production in our areas of operation would reduce our ability to make distributions to our unitholders. We depend on third parties for the natural gas and refinery off-gas we process, and the NGLs we fractionate at our facilities, and a reduction in these quantities could reduce our revenues and cash flow. Growing our business by constructing new pipelines and processing and treating facilities subjects us to construction risks and risks that natural gas supplies will not be available upon completion of the facilities. The fees charged to third parties under our gathering, processing, transmission, transportation, fractionation and storage agreements may not escalate sufficiently to cover increases in costs, or the agreements may not be renewed or may be suspended in some circumstances. We are exposed to the credit risks of our key customers, and any material nonpayment or nonperformance by our key customers could reduce our ability to make distributions to our unitholders. We may not be able to retain existing customers, or acquire new customers, which would reduce our revenues and limit our future profitability. Transportation on certain of our pipelines may be subject to federal or state rate and service regulation, and the imposition and/or cost of compliance with such regulation could adversely affect our operations and cash flows available for distribution to out unitholders. Some of our natural gas transportation operations are subject to Federal Energy Regulatory Commission's rate-making policies that could have an adverse impact on our ability to establish rates that would allow us to recover the full cost of operating our pipelines including a reasonable return. The outcome of certain FERC proceedings involving FERC policy statements is uncertain and could affect the level of return on equity that the Partnership may be able to achieve in any future rate proceeding. If we are unable to obtain new rights-of-way or the cost of renewing existing rights-of-way increases, then we may be unable to fully execute our growth strategy, which may adversely affect our operations and cash flows available for distribution to unitholders. We are indemnified for liabilities arising from an ongoing remediation of property on which certain of our facilities are located and our results of operation and our ability to make distributions to our unitholders could be adversely affected if the indemnifying party fails to perform its indemnification obligation. Our business is subject to federal, state and local laws and regulations with respect to environmental, safety and other regulatory matters, and the violation of, or the cost of compliance with, such laws and regulations could adversely affect our operations and cash flows available for distribution to our unitholders. The amount of gas we process, gather and transmit, or the crude oil we gather and transport, may be reduced if the pipelines to which we deliver the natural gas or crude oil cannot, or will not, accept the gas or crude oil. Interruptions in operations at any of our facilities may adversely affect our operations and cash flows available for distribution to our unitholders. Due to our lack of asset diversification, adverse developments in our gathering, processing, transportation, transmission, fractionation and storage businesses could reduce our operations and cash flows available for distribution to our unitholders. We may not be able to successfully execute our business plan and may not be able to grow our business, which could adversely affect our operations and cash flows available for distribution to our unitholders. We are subject to operating and litigation risks that may not be covered by insurance. As a result of damage caused by Hurricanes Katrina, Rita and Ike in the Gulf of Mexico and Gulf Coast regions in 2005 and 2008, insurance costs related to oil and gas assets in these regions have increased significantly. We may be unable to obtain insurance on our interest in Starfish at rates we consider reasonable. Our business may suffer if any of our key senior executives or other key employees discontinues employment with us or if we are unable to recruit and retain highly skilled staff. A shortage of skilled labor may make it difficult for us to maintain labor productivity, and competitive costs could adversely affect our operations and cash flows available for distribution to our unitholders. If we do not make acquisitions on economically acceptable terms, our future growth may be limited. If we are unable to timely and successfully integrate our future acquisitions, our future financial performance may suffer, and we may fail to realize all of the anticipated benefits of the transaction. Terrorist attacks aimed at our facilities could adversely affect our business. We have partial ownership interests in a number of joint venture legal entities, including Liberty, Wirth, Centrahoma and Starfish, which could adversely affect our ability to operate and control these entities. In addition, we may be unable to control the amount of cash we will receive from the operation of these entities and where we do not have control, we could be required to contribute significant cash to fund our share of their operations, which could adversely affect our ability to distribute cash to our unitholders. Risks Related to Our Partnership Structure We may issue additional common units without unitholder approval, which would dilute your ownership interests. Unitholders have less ability to influence management's decisions than holders of common stock in a corporation. Unitholders may not have limited liability if a court finds that unitholder action constitutes control of our business. Tax Risks Related to Owning our Common Units Our tax treatment depends on our status as a partnership for federal income tax purposes. If the IRS were to treat us as a corporation for federal income tax purposes then our cash available for distribution to unitholders could be substantially reduced. If we were subjected to a material amount of additional entity-level taxation by individual states, it would reduce our cash available for distribution to unitholders. If the IRS contests the federal income tax positions we take, the market for our common units may be adversely impacted and the cost of any IRS contest will reduce our cash available for distribution to our unitholders. A unitholder may be required to pay taxes on his share of our income even if the unitholder does not receive any cash distributions from us. Tax gain or loss on the disposition of our common units could be more or less than expected. Tax-exempt entities and non-U.S. persons face unique tax issues from owning our common units that may result in adverse tax consequences to them. We treat each purchaser of our common units as having the same tax benefits without regard to the actual common units purchased. The IRS may challenge this treatment, which could adversely affect the value of our common units. We prorate our items of income, gain, loss and deduction between transferors and transferees of our common units each month based upon the ownership of the common units on the first day of each month, instead of on the basis of the date a particular common unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders. A unitholder whose common units are loaned to a "short seller" to cover a short sale of common units may be considered as having disposed of those common units. If so, he would no longer be treated for tax purposes as a partner with respect to those common units during the period of the loan and may recognize gain or loss from the disposition. We have adopted certain valuation methodologies that may result in a shift of income, gain, loss and deduction between the Class A unitholders and our common unitholders. The IRS may challenge this treatment, which could adversely affect the value of our common units. The sale or exchange of 50% or more of our capital and profits interests during any 12-month period would result in our termination for federal income tax purposes. Our unitholders will likely be subject to state and local taxes and return filing requirements in states where the unitholders do not live as a result of investing in common units.

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1166036--3/2/2009--MARKWEST_ENERGY_PARTNERS_L_P